Custom News - Reverse charge on import VAT – 3rd Quater 2016

13 September 2016

Laurence Clot, Sophie Dorin

A prior authorization system should replace the current opt-in system of reverse charge on import VAT for EU-based operators.

The article 1695 II of the French General tax code currently in force mentions an opt-in system for a reverse charge mechanism on import VAT which is applicable for any economic operator.

Reminder on the past system

As a reminder, please note that, before this change, the possibility of a reverse-charge on import VAT was subject to a requirement for the approval of a simplified procedure of customs clearance with single address (known as “PDU”). Please note that as regards non-EU operators, the simplified procedure of customs clearance with single address needed to be requested by their tax representative.

The “PDU” procedure was granted by the Customs authorities after a prior audit to determine if the operator fulfilled 3 conditions:

  1. The absence of serious and repeated infringement of the customs law 
  2. The sound management of customs records
  3. The solvency of the operators.

The Current system of opt-in

The Law of 2016, June, 20th (“The Blue economy Law”) adopted by the legislator has softened the requirements to obtain a reverse charge on import VAT.

  • Concerning EU-based operators, the option for a reverse charge on import VAT is no longer subject to the condition of a requirement for the approval to a simplified procedure of customs clearance with single address “PDU”. The French Customs authorities (DGDDI) specifies in a memo dated 2016, July, 13th that the option for a reverse charge on import VAT could be already made. Please note that this option will be effective after 2016, 1st October.
  • Concerning non-EU-based operators, the reverse-charge on import VAT is still subject to the condition of requirement for “PDU” for the tax representative. However, the issue is that, since the implementation of the Union Customs code on 2016, May, 1st the procedure of customs clearance with single address (PDU) has been replaced by a new procedure of centralized clearance for which clarifications are still expected.  The centralized clearance procedure should be requested by the applicant that holds the status of authorized economic operator. The option would be valid for 3 years. 

With the Blue Economic Law, the reverse charge on import VAT system is now a simple option subscribed on a specific form for the EU-based operator.

The future System of prior authorization

  • Provisions of article 23 ter of the SAPIN II Law should replace the current opt-in system to obtain a reverse charge on import VAT by a new “authorization” system as soon as this law will enter into force. Indeed, please note that this law has not yet been published.
  • The conditions for the benefit of the reverse charge on import VAT are tightened by this new proposed bill of the French Government. Indeed, the operator will have to obtain the authorization of the French Custom Services for applying reverse charge on import VAT. 
  • This law introduces a new restrictive condition to obtain the authorization by the Custom Service: the operator will need to have carried out at least four importations within the EU territory during the last prior 12 months before the request for reverse-charge on import VAT. This authorization, once obtained, will be valid for 3 civil years and tacitly renewable for a 3 years period.
  • Furthermore, the proposed bill mentions that the validity of an option for a reverse charge on import VAT made before the entry into force of this SAPIN II law shall be considered as an “authorization”. However, it will not be tacitly renewable after the end of the 3 years period.

Please note that even if the “SAPIN II” law has not yet been published, the above mentioned provisions concerning the amendments of the reverse charge on import VAT system have been already voted and should be implemented as soon as the law is published. 

We therefore recommend to EU-based operators to make the option for reverse charge on import VAT. In order to be able to benefit from the advantages of the system at the current conditions.

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